Stanford CS 007-06 (2020): Personal Finance for Engineers / Debt

Ad

Ad

Ad

Ad

Ad

Ad

Ad

Ad

Ad

Ad

Ad

Ad

PERSONAL
FINANCE FOR
ENGINEERS
CS 007: SESSION 6

ALL
ABOUT
DEBT
CS 007

COMPOUNDING
good for savings. bad for debt.

THE MAGIC OF COMPOUNDING
• Not convinced that Albert Einstein
said it was the greatest force in the
universe.
• It's the k...

COMPOUNDING MADE EASY
• Rule of 72
• For each year, just use
=POWER(1+rate, year)
• 4% over 20 years is 2.19x
• 8% over 20...

ANNUAL PERCENTAGE RATE (APR)
• Standardized measure of how expensive a
loan is, or the expected return of an
investment
• ...

THE BENEFITS OF AN EARLY START
• Compounding really takes off
over long time periods
• Exponential functions are non-
line...

TYPES OF DEBT
student loans, mortgage, auto, credit cards

6: STUDENT LOANS THAT YOU ARE RESPONSIBLE FOR?
• National student loan debt at $1.64T
• 44.7 million student loan borrower...

STUDENT LOANS
• $1.6 Trillion in the US, and growing rapidly.
• Unsecured loan provided to fund education &
some related e...

MORTGAGES
• $15.4 Trillion in the US. $10.9
Trillion for just family residences.
• Secured loan against a property.
Can be...

AUTO LOANS
• $1.3 Trillion (as of mid-2018)
• Secured loan against a vehicle,
typically acquired at purchase.
• Wide varie...

CREDIT CARDS
• $1 Trillion+ (as of Q2 2019)
• Unsecured loan, paid on a revolving
30-day cycle
• Wide variety of terms. In...

CREDIT SCORES
your borrowing record & why it matters

WHAT’S A CREDIT SCORE
• Lenders report to 3 major centralized
credit agencies when you apply for debt,
receive debt, and w...

WHY DO CREDIT SCORES MATTER?
• Critical component in qualifying for
new loans and the rate they are set at.
• Many product...

HOW DO I GET A CREDIT SCORE?
• Most common methods
• Secured credit cards
• Student credit cards
• Store credit cards
• Au...

LOANS & RATES
how much will you owe?

$12,000 AT 0% INTEREST FOR 1 YEAR
SIMPLE LOAN
PAYMENT = $1,000 PER MONTH
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$60...

$12,000 AT 12% INTEREST FOR 1 YEAR
SIMPLE LOAN
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$800.00
$900....

AMORTIZATION
• The process of reducing the value of
a loan by a periodic amount.
• PMT(), PPMT(), IPMT() built into
spread...

$30,000 AT 2.5% INTEREST FOR 3 YEARS
SAMPLE AUTO LOAN
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$800.0...

$30,000 AT 8.5% INTEREST FOR 3 YEARS
SAMPLE AUTO LOAN
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$800.0...

$800,000 AT 4% INTEREST FOR 30 YEARS
SAMPLE MORTGAGE
$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,50...

PAYING OFF DEBT
different strategies to dig out

THE DANGERS OF DEBT
• Bankruptcy is literally when you
can't pay your debts. You can't go
bankrupt if you don't have debt....

HOW DO I PAY OFF DEBT EFFICIENTLY?
• This process assumes you can allocate more $
per month to paying off debt than the mi...

SHOULD I PAY OFF ALL OF MY DEBT?
• More debt = more risk
• Not all debt is the same
• Compounding is not your friend with
...

QUESTIONS
CS 007

WEEK 7: GOOD INVESTING IS BORING
• The Magic of Compounding
• How to Calculate Returns
• Different Types of Investments:
S...

You are reading a preview.

Activate your 30 day free trial to continue reading.

Share SlideShare

Facebook
Twitter
LinkedIn

Embed

Size (px)

Show related SlideShares at end

WordPress Shortcode

Link

LinkedIn
Facebook
Twitter
Email

Replay

Top clipped slide

1 of 30 Ad

1 of 30 Ad